REACTIONS: “Who Killed The Debt Deal?” & “More Than Just Broccoli”

Twofer today.  The Times does the debt deal and AEI talks consequences of the insurance mandate, below the break.

First up, the New York Times proves it still has a reporting division with a fascinating (and only slightly unfair) breakdown of the breakdown in the debt limit talks last year:

Budget deals happen in much the same way you might haggle over the purchase of a house: one side bangs out a proposed contract and sends it to aides on the other side, who cross out some numbers and phrases and insert new ones in their place, until the two sides ultimately iron out their differences, or until someone delivers a final offer and walks away. In this case, Obama’s principal negotiators — Jack Lew, then his budget director, and Rob Nabors, his top aide on legislation — sent a proposal to Boehner’s team that included $1.5 trillion in new revenue over 10 years. The White House negotiators knew this had about as much chance of happening as a meteorite falling on the Capitol, but the real question was whether Boehner was willing to go some distance toward meeting them on the revenue side of the ledger, or whether he would stick to Cantor’s hard line against any form of new taxes.

When the response came back to Nabors, Boehner’s aides had, as expected, struck the $1.5 trillion from the offer. But in its place they had inserted a strange formulation: they were proposing to reduce federal revenue, “compared to current law,” by $2.8 trillion. On the surface, this sounded like a flagrant rejection of what the White House was proposing — “You’re asking for more in taxes, we’re giving you less” — but in fact Boehner was speaking in complex code.

Full Article

COMMENT:  I’m not sure the piece is entirely fair to Mr. Boehner toward the end, when it notes that Mr. Obama eventually managed to “get” his caucus behind the deal, but Mr. Boehner did not. Actually, President Obama just barely got his legislative leaders behind a deal revised, wholly on the president’s terms, that was obviously going to be unacceptable to Speaker Boehner Republicans on a number of different fronts. Mr. Boehner never even had the chance to present the original deal — his deal — to his people.  By the time that deal was back on the table, the trust was broken and the political window for it had passed.

Still, it looks like the original “Sunday deal” was actually pretty dease (at least to me, a guy who has no real problem with revenue increases through tax reform, especially if part of that mix is fuzzy-math macro projections). It’s unfortunate that it didn’t get through… but I seriously question that House and Senate Democrats would have accepted it, given the cuts to entitlements. It’s entirely possible that the terrible compromise we ended up getting is actually the best we could do, given the budgetary commitments on both sides of the aisle and the mad fiscal priorities of the Average American Voter (who appears to sincerely believe that all we have to do to balance the budget is cut foreign aid and eliminate ‘fraud and waste’, whatever that means).

Moving right along, some guy named Lee has a fine piece about Obamacare and the insurance mandate up at the American Enterprise Institute today, taking the anti-mandate “what-if” questions out of the realm of thought experiment into plausible possibility:

Does anyone really think that Congress is going to pass a law making people buy a pound or two of broccoli a day? My guess would be no… Unfortunately, there is more at issue here than just broccoli…

Imagine that our current recession goes on, or even takes a turn for the worse. As John Maynard Keynes argued, in a time of economic anxiety and uncertainty, individuals will invariably act in a way that secures their own personal welfare, but which is disastrous to the overall economy: They will sit on their money and refuse to spend it. The bulk of Keynesian economics was to figure out how to get people back to spending their money on stuff, i.e., to increase the aggregate consumer demand. For example, Keynes told governments that they could cut taxes, lower interest rates, decrease the real value of wages through imperceptible inflation, provide stimulus packages, or build highways and even pyramids, all of which were ultimately designed to get people to go back out shopping for things. For decades, Keynesian economics seemed to work like a charm. But for some while, and especially since the crisis of 2008, it would appear that we have exhausted the Keynesian bag of tricks. We can’t make interest rates lower. We can’t inflate. We can’t stimulate by more deficit spending. We can’t afford grand building schemes. We have reached the point where American presidents have used the bully-pulpit to beg consumers to go out and start spending again.

But what if the president had a new super-Keynesian tool—a Congress that had been granted unlimited power to regulate economic activity and/or economic decisions? Under these circumstances, in the midst of a deepening and intractable depression, there would be a temptation to create a legislative solution that would be quite simple in principle. According to an index of their income, people would be mandated to purchase a certain amount of consumer goods. If they fell below this amount, they would then be compelled to pay the government a penalty. Those who abided by the mandate and did their fair share of consuming would help the economy get back on its feet. Those who had made the anti-social economic decision to save their money would have a reasonable portion of their savings taken away from them, to be spent on stimulus packages or building projects. Of course, the government would not need to tell us what to buy—only how much of it. Later, other economic emergencies might come along that required more governmental fine-tuning of our individual economic decisions. But there would be no need for a confrontation with the Supreme Court over whether Congress had the power to regulate these decisions, because, according to my scenario, we are imagining an America where ObamaCare had already established this principle once and for all, after being upheld by the Supreme Court.

Full Article.

COMMENT: The argument the Supreme Court’s liberal wing yesterday offered over and over again yesterday, during oral argument over the insurance mandate, was two-pronged:

Prong one: Congress cannot just go around mandating participation in any old market.  It can’t make you buy a cell phone just to benefit cell phone manufacturers, for example.  But, Justices Kagan and Ginsburg argued, health insurance is a unique market, where refusal to participate transfers cost burdens onto your fellow citizens.  (This is because uninsured people still get treatment, usually at the expense of the insured.  I won’t go into the federalist implications of that particular mandate.)

Prong two: everyone is part of the health care market, because everyone eventually needs health care.  Justice Kennedy: “All citizens are in the market, in the sense that they’re creating a risk that must be accounted for.”

Because everyone is going to act within the health care market at some point, and because acting in the market in one manner (waiting to buy insurance until you’re sick) rather than acting in another manner (carrying insurance at all times) has negative economic consequences for everyone (especially under the Obamacare regime), Congress has the power to compel all persons to act in the more economically favorable manner, thanks to the graceful conjunction (or Gordian knot, take your pick) of the Interstate Commerce and Necessary & Proper clauses.  This is the government’s “limiting principle,” and it’s why Congress can force you to buy insurance but not broccoli.

Only it doesn’t hold up, as the AEI piece illustrates, because it doesn’t limit much of anything.

For example: food is also part of health care, as obesity experts remind us on a daily basis.  Prong one: Since everybody eats, we are all actors in the food market, both in itself and as part of the health care market.  Prong two: If Jim acts in one manner (eating lots of cookies and no broccoli) rather than another (eating no cookies and the FDA-recommended daily portion of broccoli), he is likely to be more obese and unhealthy, which has negative consequences for everyone (especially, again, under the Obamacare regime of mandatory and highly regulated insurance). This constitutes a cost transfer, wherein the economic costs of Jim’s failure to eat broccoli are borne by everybody else (especially under Obamacare’s “community rating” rules, which forbid Jim’s insurer from simply hiking his premiums).  Conclusion: as an extension of its broad power to regulate even economic inactivity, Congress has the power to compel all persons to act in the more economically favorable manner, forcing all persons to purchase a quota of broccoli every month and limiting the amount of cookies one is allowed to legally purchase.

Or, again, we can take the example in the article above.  Prong one: Everyone is part of the economy.  We all produce and buy things, or rely on others to produce and buy things and give them to us.  Food and health care are just two of the obvious areas where market participation is universal.   Prong two: under Keynesian economic theory, if Jim saves his money now in order to spend it later, he is directly impacting the economy in the here-and-now, potentially putting Bob out of a job.  He is transferring the cost of inactivity from himself to Bob.  Conclusion: if General Verilli and Justice Kagan are right about the “limiting principle” in health care, then Congress has the power to compel Jim and those like him to spend some or all of their money right now, this year, in order to get the economy going again for everyone.

In effect, if the mandate stands — at least on the principle that the national government has presented in its defense — the most dire predictions of constitutionalists will be borne out.  It would mean the death of federalism and the dawn of a new plenary economic policing power seated in Washington.

Have I missed anything?

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